AMD revises GlobalFoundries supply deal to improve output

AMD revealed today it has made an amendment to its wafer-supply agreement with GlobalFoundries, the spinout of its own foundry operations, in a way that "better aligns to AMD's business and incentivizes GlobalFoundries to continue improving 32nm yields." Under the amended deal, AMD will pay the chipmaker only for good 32nm die it receives in 2011 while prices for 45nm wafers will now be based on a fixed pre-agreed price.

Previously AMD paid for all chips produced at cost of production plus a markup for Globalfoundries. As part of the deal AMD appears also to be transitioning more of its business to its spinoff and away from TSMC. Neither party said how many wafers AMD is committed to buy, only that it will be a fixed number of chips each quarter, and the company estimates it will pay Globalfoundries $1.1 billion to $1.5 billion in 2011 for outsourced manufacturing.

AMD and Globalfoundries will revert to an arrangement whereby AMD pays for all chips produced on a cost-plus basis in 2012 and expect transactions of $1.5 billion to $1.9 billion in that year for outsourced manufacturing. The company plans to host a conference this morning reviewing the amendment and clearing out doubts.